Cryptocurrency has now become relatively more famous than it was before the pandemic. As a digital currency, it facilitates smooth online transactions and is preferred for cross-border transactions. Besides providing some new opportunities, cryptocurrencies pose challenges to cybersecurity. In this article, we will discuss how cryptocurrencies affect cybersecurity and how new and existing cryptocurrencies contribute to the increase in cybercrime.
Introduction of Cryptocurrency
A cryptocurrency can be defined as an electronic form of money that can be used for doing transactions online. People doing any transactions can use it as a medium of exchange like they use money. This electronic payment leverages cryptography to make transactions more secure.
Cryptocurrencies are virtual currencies that use blockchain-based decentralized networks for performing transactions. Multiple forms of cryptocurrencies are available and in use, including Bitcoin, Dogecoin, Litecoin, Ethereum, and many more. This currency has neither any central managing authority nor any government backing.
Advantages & Disadvantages of Cryptocurrency
Cryptocurrencies have both advantages and disadvantages so it is important to know what are their pros and cons in order to minimize disadvantages or mitigate them.
Benefits of cryptocurrency include
- Using cryptocurrency is easy due to third-party services that accept it for online transactions so anyone can use it.
- Cryptocurrency can be converted into any local currency and transferred to the owner’s bank easily.
- Processing fees for cryptocurrencies are pretty less than that for credit cards.
Disadvantages of cryptocurrency include
- As cryptocurrency is still new and not much popular, many people are not aware of it or do not know how to use it.
- There is no stable value of cryptocurrency and its value can rise or drop instantly with no clear indication.
- Cryptocurrency exchanges are vulnerable to hacking, and many exchanges till date are even hacked.
Increase in Cybercrimes due to Cryptocurrency
Because cryptocurrency is not backed/guaranteed by any government or central authority, cybercriminals use it for money laundering and other illegal purposes. As cryptocurrency is decentralized, it is widely used by cybercriminals to hack crypto trading platforms. Also, attackers mostly demand ransom money in the form of cryptocurrency in ransomware attacks. To know more about how ransomware attacks happen and their preventive measures, read “How to deal with ransomware“.
It is convenient for cybercriminals to ask for ransom payments in crypto or digital currency because no one can trace them once a ransom is paid. Later, they can convert the cryptocurrency and transfer it to their banks without getting tracked. With the increasing popularity of cryptocurrencies, the number of cybercrimes involving crypto transactions is increasing.
Moreover, many people hold cryptocurrency in the form of digital assets to avoid income tax and can use it on trading platforms to gain more profits. Online money laundering incidents have increased after cryptocurrency gained popularity.
Cryptocurrency Scams Affecting Cybersecurity
Cryptocurrency scams are increasing in number day by day because attackers can easily extort money from their targets without leaving any evidence that may lead to them. Although various new types of cryptocurrency scams are being introduced, some popular types of scams are
- Investment scams: Some crypto-investing platforms lure people to invest their cryptocurrencies and gain attractive profits. These platforms appear to be legitimate as they host fake testimonials and reviews that show how investing in cryptocurrency with them can benefit investors. When investors try to withdraw their crypto profits, they are asked to invest more cryptocurrencies. Later, they do not offer anything to the investors, making them suffer huge losses.
- Giveaway scams: These forms of cyberattacks trap people to invest their cryptocurrencies with them on the pretext of gifting extra cryptocurrencies as a giveaway. However, when they receive the investors’ cryptocurrency, they never give anything back.
- Initial coin offering fraud: Attackers hack crypto wallets using different ways like using Bitcoin stealing apps for launching an attack. A common type of scam, an initial coin offering (ICO) involves luring people into investing money in launching a new cryptocurrency that does not exist (fake). Investors are promised that they would get big profits upon investment but all turn out to be fake.
Impact of Cryptocurrency on Businesses
Organizations that use cryptocurrency as a medium of exchange for transactions are prone to various cyber risks. Given the fact that cryptocurrency is fully decentralized, no authority looks after (monitors) transactions and other related activities. As no cryptocurrency has been fully regulated, cybercriminals use it for various illicit purposes.
If organizations using cryptocurrency do not implement proper cybersecurity measures, they will be primary targets of attackers. Cryptocurrency traders and exchange users may face severe losses due to cyber risks.
Some cybersecurity risks associated with using cryptocurrency include
- Phishing: Cybercriminals target crypto-trading platforms via phishing campaigns to steal user credentials so that they can hack users’ accounts and ask for a ransom or take their cryptocurrency.
- Malware: Attackers use cryptocurrency-related malware to steal the mining resources of the target mining machine by installing it on the machine. This malware can also be used to steal cryptocurrency from users’ wallets.
- Compromised registration forms: Cybercriminals steal users’ information via fake crypto registration forms in order to sell it in the black market (dark web) for money.
- Hacked trading platforms: Crypto-trading platforms are hacked by attackers to steal the cryptocurrencies of the users trading on these platforms.
- Third-party apps: Third-party apps serve as a good tool for cybercriminals to steal the data of users and prepare for further attacks.
By enforcing appropriate crypto-cybersecurity protocols and practices and being careful while using apps and websites, organizations can protect their businesses from such cyberattacks. Attackers do not mess with organizations that have a high level of cybersecurity. With the rising cybercrimes related to cryptocurrency, it is inevitable for businesses that they regulate and monitor cryptocurrency exchanges in the safest possible way.
Need for a Cyber Liability Insurance Policy
As more financial institutions and organizations are accepting cryptocurrency, the need for crypto-related insurance policies arises. Considering the instability and decentralized nature of cryptocurrencies, insuring them is a good way to minimize the associated losses. Moreover, the increasing value of Bitcoin and similar cryptocurrencies urge cybercriminals to attack online crypto wallets and exchanges.
To protect organizations from a variety of cyberattacks, cyber liability insurance is necessary. Cyber liability insurance not only covers ransomware payments and traditional attacks along with the costs associated with investigations and other things but also includes new evolving cyberattacks like attacks related to cryptocurrency. As it is evident from the name itself, crypto-related insurance policies can only protect organizations from attacks related to cryptocurrency, not other forms of attacks. However, opting for a good cyber liability insurance policy that covers crypto-related risks is the best option to ensure overall cybersecurity.
Wrapping Up
Since cryptocurrency has gained so much popularity, banning cryptocurrency is not an option now for organizations and governments. The only way to limit the drawbacks and risks associated with cryptocurrencies is to implement crypto-related cybersecurity policies and have a cyber liability insurance policy that caters to organizations’ cybersecurity goals.